Interest Rate Waiting Game Continues

“Today’s decision to hold interest rates at 5.25% was widely expected. However, it prolongs the period of uncertainty for firms grappling with high borrowing costs.

“Our recent survey of more than 1,000 UK businesses found a third of report a direct negative impact of the current rate, while around one-in-ten are positively impacted. This largely comes down to businesses weighed down by borrowing costs versus those with surpluses to invest. Smaller businesses, and those in sectors such as hospitality and retail, are more likely to be in a precarious state.

“While yesterday’s inflation data showed a further easing, most small businesses know that the economy remains fragile. The interest rate is itself a driver of inflation, as housing, rental, and borrowing costs continue to rise.

“Our most recent forecast expects some cuts to the base rate going forward, potentially falling to 4.5% by the end of the year. But in the meantime, businesses need reassurance from policymakers that there is a clear plan to drive much needed economic growth.”